Coming closer to the section at hand, in Aditanar
Educational Institution v. Additional Commissioner of
Income Tax, (1997) 224 ITR 310, this Court while construing
the predecessor Section, namely, Section 10(22) of the Income
Tax act, held:
“The High Court has made an observation that any
income which has a direct relation or incidental to
the running of the institution as such would qualify
for exemption. We may state that the language of
Section 10(22) of the Act is plain and clear and the
availability of the exemption should be evaluated
each year to find out whether the institution existed
during the relevant year solely for educational
purposes and not for the purposes of profit. After
meeting the expenditure, if any surplus results
incidentally from the activity lawfully carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes since the
object is not one to make profit. The decisive or acid
test is whether on an overall view of the matter, the
object is to make profit. In evaluating or appraising
the above, one should also bear in mind the
distinction/difference between the corpus, the
objects and the powers of the concerned entity.”
10. In American Hotel & Lodging Assn. Educational
Institute v. CBDT, (2008) 301 ITR 86, this Court dealt with
Section 10(23C)(vi) as follows:
“29. In CIT v. Surat Art Silk Cloth Manufacturers'
Assn. [(1980) 2 SCC 31 : 1980 SCC (Tax) 170 :
(1980) 121 ITR 1] it has been held by this Court that
test of predominant object of the activity is to be
seen whether it exists solely for education and not
to earn profit. However, the purpose would not lose
its character merely because some profit arises
from the activity. That, it is not possible to carry on
educational activity in such a way that the
expenditure exactly balances the income and there
is no resultant profit, for, to achieve this, would not
only be difficult of practical realisation but would
reflect unsound principles of management. In order
to ascertain whether the institute is carried on with
the object of making profit or not it is the duty of the
prescribed authority to ascertain whether the
balance of income is applied wholly and exclusively
to the objects for which the applicant is established.
30. In deciding the character of the recipient, it is
not necessary to look at the profits of each year, but
to consider the nature of the activities undertaken in
India. If the Indian activity has no correlation with
education, exemption has to be denied (see
judgment of this Court in Oxford University
Press [(2001) 3 SCC 359 : (2001) 247 ITR 658] ).
Therefore, the character of the recipient of income
must have character of educational institution in
India to be ascertained from the nature of the
activities. If after meeting expenditure, surplus
remains incidentally from the activity carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes. In other
words, existence of surplus from the activity will not
mean absence of educational purpose (see
judgment of this Court in Aditanar Educational
Institutionv. CIT [(1997) 3 SCC 346 : (1997) 224 ITR
310] ). The test is—the nature of activity. If the
activity like running a printing press takes place it is
not educational. But whether the income/profit has
been applied for non-educational purpose has to be
decided only at the end of the financial year.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5167 OF 2008
M/S. QUEEN’S EDUCATIONAL SOCIETY …APPELLANT
VERSUS
COMMISSIONER OF INCOME TAX …RESPONDENT
WITH
C.A. NO.5168 OF 2008
Citation;AIR 2015 SC 3253
R.F.Nariman, J.
1. Leave granted in the special leave petitions.
2. The present appeals relate to a common judgment dated
24th September, 2007 passed by the High Court of Uttarakhand,
Nainital in two income tax appeals, and a judgment of the
Punjab and Haryana High Court dated 29th January, 2010 in
Pine Grove International Charitable Trust v. Union of India –
(2010) 327 ITR 273 . Various other appeals (excepting Civil
Appeal No.8962 of 2010) are filed by the Union of India/ Central
Board of Direct Taxes in cases where the aforesaid judgment in
Pine Grove has been followed.
3. The facts necessary to understand the controversy in the
two income tax appeals before the Uttarakhand High Court,
Nainital, may be gleaned from the facts of one of them, namely,
the Queen’s Educational Society case. The appellant filed its
return for assessment years 2000-2001 and 2001-2002
showing a net surplus of Rs.6,58,862/- and Rs.7,82,632/-
respectively. Since the appellant was established with the sole
2Page 3
object of imparting education, it claimed exemption under
Section 10(23C) (iiiad) of the Income Tax Act, 1961. The
Assessing Officer vide its order dated 20th February, 2003
rejected the exemption claimed by the appellant. The CIT
(Appeals) by its order dated 28th March, 2003 allowed the
appellant’s appeal, and the ITAT, Delhi, by its judgment dated
7
th July, 2006 passed an order dismissing the appeal preferred
by the revenue. In a reference to the High Court under Section
260A of the Income Tax Act, the High Court vide the impugned
judgment set aside the judgment of the ITAT and affirmed the
order of the Assessing Officer.
4. These appeals from the Uttarakhand High Court, Nainital,
concern themselves with the provision of Section 10(23C) (iiiad)
of the Act:
“Section 10- Incomes not included in total
income.—In computing the total income of a
previous year of any person, any income falling
within any of the following clauses shall not be
included—
(23-C) any income received by any person on
behalf of—
(iii-ad) any university or other educational institution
existing solely for educational purposes and not for
3Page 4
purposes of profit if the aggregate annual receipts of
such university or educational institution do not
exceed the amount of annual receipts as may be
prescribed”
5. It will be noticed that the Section has three requirements
– (a) the educational institution must exist solely for educational
purposes (b) it should not be for purposes of profit and (c) the
aggregate annual receipts of such institution should not exceed
the amount or annual receipts as may be prescribed. Such
prescription is to be found in Rule 2CA being an amount of Rs.1
crore.
6. The said Section was inserted by Finance Act No.2 of
1998 with effect from 1st April, 1999. Prior thereto, the Income
Tax Act had a corresponding Section, namely, Section 10(22)
which was as follows:-
“Section 10- Incomes not included in total
income.—In computing the total income of a
previous year of any person, any income falling
within any of the following clauses shall not be
included—
(22) any income of a university or other educational
institution, existing solely for educational purposes
and not for purposes of profit”
4Page 5
7. We have heard learned counsel for the assessees as well
as learned counsel for the revenue. The assessees argue that
the impugned judgment is contrary to the law laid down by at
least three Supreme Court judgments. Further, the wrong test
has been adopted and followed, which is a test laid down by the
Assessing Officer and not by any Supreme Court judgment –
namely, that whenever a profit/surplus is made by an
educational institution, it ceases to exist solely for educational
purposes and becomes a profit making enterprise. In support of
the Punjab and Haryana High Court judgment under appeal,
counsel for the assessees argued that since the sole basis for
not granting them exemption for the assessment years under
question was the following of the Uttarakhand High Court
judgment, if the said judgment is found to be incorrect, they are
bound to succeed. For that reason, the revenue’s appeal
against the Punjab and Haryana High Court judgment should
be dismissed. Counsel for the revenue, on the other hand,
attempted to support the Uttarakhand High Court judgment by
stating that the Section does not contemplate the making of
large profits. If an educational institution in fact makes large
5Page 6
profits then even though it may plough such profits back into
the purchase of assets for education, yet such institution cannot
be said to be existing solely for educational purposes. It would
then become an institution which would really be for profit.
8. In CIT v. Surat Art Silk Cloth Manufacturers' Assn.,
(1980) 121 ITR 1, this Court while construing the definition of
“charitable purpose” in Section 2(15) of the Income Tax Act
held:
“17. The next question that arises is as to what is
the meaning of the expression “activity for profit”.
Every trust or institution must have a purpose for
which it is established and every purpose must for
its accomplishment involve the carrying on of an
activity. The activity must, however, be for profit in
order to attract the exclusionary clause and the
question therefore is when can an activity be said to
be one for profit? The answer to the question
obviously depends on the correct connotation of the
preposition “for”. This preposition has many shades
of meaning but when used with the active participle
of a verb it means “for the purpose of” and connotes
the end with reference to which something is done.
It is not therefore enough that as a matter of fact an
activity results in profit but it must be carried on with
the object of earning profit. Profit-making must be
the end to which the activity must be directed or in
other words, the predominant object of the activity
must be making a profit. Where an activity is not
pervaded by profit motive but is carried on primarily
for serving the charitable purpose, it would not be
correct to describe it as an activity for profit. But
6Page 7
where, on the other hand, an activity is carried on
with the predominant object of earning profit, it
would be an activity for profit, though it may be
carried on in advancement of the charitable purpose
of the trust or institution. Where an activity is carried
on as a matter of advancement of the charitable
purpose or for the purpose of carrying out the
charitable purpose, it would not be incorrect to say
as a matter of plain English grammar that the
charitable purpose involves the carrying on of such
activity, but the predominant object of such activity
must be to subserve the charitable purpose and not
to earn profit. The charitable purpose should not be
submerged by the profit making motive; the latter
should not masquerade under the guise of the
former. The purpose of the trust, as pointed out by
one of us (Pathak,J.) in Dharmadeepti
v. CIT [(1978) 3 SCC 499 : 1978 SCC (Tax) 193]
must be ‘“essentially charitable in nature” and it
must not be a cover for carrying on an activity which
has profit making as its predominant object. This
interpretation of the exclusionary clause in Section 2
clause (15) derives considerable support from the
speech made by the Finance Minister while
introducing that provision. The Finance Minister
explained the reason for introducing this
exclusionary clause in the following words:
“The definition of ‘charitable purpose’ in that clause
is at present so widely worded that it can be taken
advantage of even by commercial concerns which,
while ostensibly serving a public purpose, get fully
paid for the benefits provided by them namely, the
newspaper industry which while running its concern
on commercial lines can claim that by circulating
newspapers it was improving the general
knowledge of the public. In order to prevent the
misuse of this definition in such cases, the Select
Committee felt that the words ‘not involving the
7Page 8
carrying on of any activity for profit’ should be added
to the definition.”
It is obvious that the exclusionary clause was added
with a view to overcoming the decision of the Privy
Council in the Tribune case [AIR 1939 PC 208 : In
Re the Trustees of the Tribune, (1939) 7 ITR 415]
where it was held that the object of supplying the
community with an organ of educated public opinion
by publication of a newspaper was an object of
general public utility and hence charitable in
character, even though the activity of publication of
the newspaper was carried on commercial lines with
the object of earning profit. The publication of the
newspaper was an activity engaged in by the trust
for the purpose of carrying out its charitable purpose
and on the facts it was clearly an activity which had
profit making as its predominant object, but even so
it was held by the Judicial Committee that since the
purpose served was an object of general public
utility, it was a charitable purpose. It is clear from
the speech of the Finance Minister that it was with a
view to setting at naught this decision that the
exclusionary clause was added in the definition of
“charitable purpose”. The test which has, therefore,
now to be applied is whether the predominant object
of the activity involved in carrying out the object of
general public utility is to subserve the charitable
purpose or to earn profit. Where profit making is the
predominant object of the activity, the purpose,
though an object of general public utility, would
cease to be a charitable purpose. But where the
predominant object of the activity is to carry out the
charitable purpose and not to earn profit, it would
not lose its character of a charitable purpose merely
because some profit arises from the activity. The
exclusionary clause does not require that the
activity must be carried on in such a manner that it
does not result in any profit. It would indeed be
difficult for persons in charge of a trust or institution
8Page 9
to so carry on the activity that the expenditure
balances the income and there is no resulting profit.
That would not only be difficult of practical
realisation but would also reflect unsound principle
of management. We, therefore, agree with Beg, J.,
when he said in Sole Trustee, Loka Shikshana
Trust case [(1976) 1 SCC 254 : 1976 SCC (Tax)
14 : (1975) 101 ITR 234] that “if the profits must
necessarily feed a charitable purpose under the
terms of the trust, the mere fact that the activities of
the trust yield profit will not alter the charitable
character of the trust. The test now is, more clearly
than in the past, the genuineness of the purpose
tested by the obligation created to spend the money
exclusively or essentially on charity”. The learned
Judge also added that the restrictive condition “that
the purpose should not involve the carrying on of
any activity for profit would be satisfied if profit
making is not the real object” (emphasis supplied).
We wholly endorse these observations.
The application of this test may be illustrated by
taking a simple example. Suppose the Gandhi
Peace Foundation which has been established for
propagation of Gandhian thought and philosophy,
which would admittedly be an object of general
public utility, undertakes publication of a monthly
journal for the purpose of carrying out this charitable
object and charges a small price which is more than
the cost of the publication and leaves a little profit,
would it deprive the Gandhi Peace Foundation of its
charitable character? The pricing of the monthly
journal would undoubtedly be made in such a
manner that it leaves some profit for the Gandhi
Peace Foundation, as, indeed, would be done by
any prudent and wise management, but that cannot
have the effect of polluting the charitable character
of the purpose, because the predominant object of
the activity of publication of the monthly journal
would be to carry out the charitable purpose by
9Page 10
propagating Gandhian thought and philosophy and
not to make profit or in other words, profit making
would not be the driving force behind this activity.
But it is possible that in a given case the degree or
extent of profit making may be of such a nature as
to reasonably lead to the inference that the real
object of the activity is profit making and not serving
the charitable purpose. If, for example, in the
illustration given by us, it is found that the
publication of the monthly journal is carried on
wholly on commercial lines and the pricing of the
monthly journal is made on the same basis on
which it would be made by a commercial
organisation leaving a large margin of profit, it might
be difficult to resist the inference that the activity of
publication of the journal is carried on for profit and
the purpose is non-charitable. We may take by way
of illustration another example given by Krishna
Iyer, J., in the Indian Chamber of Commerce
case [(1976) 1 SCC 324 : 1976 SCC (Tax) 41 :
(1975) 101 ITR 796] where a blood bank collects
blood on payment and supplies blood for a higher
price on commercial basis. Undoubtedly, in such a
case, the blood bank would be serving an object of
general public utility but since it advances the
charitable object by sale of blood as an activity
carried on with the object of making profit, it would
be difficult to call its purpose charitable. Ordinarily
there should be no difficulty in determining whether
the predominant object of an activity is
advancement of a charitable purpose or profit
making. But cases are bound to arise in practice
which may be on the borderline and in such cases
the solution of the problem whether the purpose is
charitable or not may involve much refinement and
present real difficulty.
There is, however, one comment which is
necessary to be made whilst we are on this point
and that arises out of certain observations made by
this Court in Sole Trustee, Loka Shikshana Trust
case [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 :
(1975) 101 ITR 234] as well as Indian Chamber of
Commerce case [(1976) 1 SCC 324 : 1976 SCC
(Tax) 41 : (1975) 101 ITR 796] . It was said by
Khanna, J. in Sole Trustee, Loka Shikshana Trust
case [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 :
(1975) 101 ITR 234] :
“[I]f the activity of a trust consists of carrying on a
business and there are no restrictions on its making
profit, the court would be well justified in assuming
in the absence of some indication to the contrary
that the object of the trust involves the carrying on
of an activity for profit.”
And to the same effect, observed Krishna Iyer, J. in
the Indian Chamber of Commerce case [(1976) 1
SCC 324 : 1976 SCC (Tax) 41 : (1975) 101 ITR
796] when he said:
“An undertaking by a business organisation is
ordinarily assumed to be for profit unless expressly
or by necessary implication or by eloquent
surrounding circumstances the making of profit
stands loudly negatived .... A pragmatic condition,
written or unwritten, proved by a prescription of
profits or by long years, of invariable practice or
spelt from some strong surrounding circumstances
indicative of anti-profit motivation — such a
condition will qualify for charitable purpose.”
Now we entirely agree with the learned Judges who
decided these two cases that activity involved in
carrying out the charitable purpose must not be
motivated by a profit objective but it must be
undertaken for the purpose of advancement or
carrying out of the charitable purpose. But we find it
difficult to accept their thesis that whenever an
activity is carried on which yields profit, the
inference must necessarily be drawn, in the
11Page 12
absence of some indication to the contrary, that the
activity is for profit and the charitable purpose
involves the carrying on of an activity for profit. We
do not think the Court would be justified in drawing
any such inference merely because the activity
results in profit. It is in our opinion not at all
necessary that there must be a provision in the
constitution of the trust or institution that the activity
shall be carried on no profit no loss basis or that
profit shall be proscribed. Even if there is no such
express provision, the nature of the charitable
purpose, the manner in which the activity for
advancing the charitable purpose is being carried
on and the surrounding circumstances may clearly
indicate that the activity is not propelled by a
dominant profit motive. What is necessary to be
considered is whether having regard to all the facts
and circumstances of the case, the dominant object
of the activity is profit making or carrying out a
charitable purpose. If it is the former, the purpose
would not be a charitable purpose, but, if it is the
latter, the charitable character of the purpose would
not be lost.
9. Coming closer to the section at hand, in Aditanar
Educational Institution v. Additional Commissioner of
Income Tax, (1997) 224 ITR 310, this Court while construing
the predecessor Section, namely, Section 10(22) of the Income
Tax act, held:
“The High Court has made an observation that any
income which has a direct relation or incidental to
the running of the institution as such would qualify
for exemption. We may state that the language of
Section 10(22) of the Act is plain and clear and the
availability of the exemption should be evaluated
each year to find out whether the institution existed
during the relevant year solely for educational
purposes and not for the purposes of profit. After
meeting the expenditure, if any surplus results
incidentally from the activity lawfully carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes since the
object is not one to make profit. The decisive or acid
test is whether on an overall view of the matter, the
object is to make profit. In evaluating or appraising
the above, one should also bear in mind the
distinction/difference between the corpus, the
objects and the powers of the concerned entity.”
10. In American Hotel & Lodging Assn. Educational
Institute v. CBDT, (2008) 301 ITR 86, this Court dealt with
Section 10(23C)(vi) as follows:
“29. In CIT v. Surat Art Silk Cloth Manufacturers'
Assn. [(1980) 2 SCC 31 : 1980 SCC (Tax) 170 :
(1980) 121 ITR 1] it has been held by this Court that
test of predominant object of the activity is to be
seen whether it exists solely for education and not
to earn profit. However, the purpose would not lose
its character merely because some profit arises
from the activity. That, it is not possible to carry on
educational activity in such a way that the
expenditure exactly balances the income and there
is no resultant profit, for, to achieve this, would not
only be difficult of practical realisation but would
reflect unsound principles of management. In order
to ascertain whether the institute is carried on with
the object of making profit or not it is the duty of the
prescribed authority to ascertain whether the
balance of income is applied wholly and exclusively
to the objects for which the applicant is established.
30. In deciding the character of the recipient, it is
not necessary to look at the profits of each year, but
to consider the nature of the activities undertaken in
India. If the Indian activity has no correlation with
education, exemption has to be denied (see
judgment of this Court in Oxford University
Press [(2001) 3 SCC 359 : (2001) 247 ITR 658] ).
Therefore, the character of the recipient of income
must have character of educational institution in
India to be ascertained from the nature of the
activities. If after meeting expenditure, surplus
remains incidentally from the activity carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes. In other
words, existence of surplus from the activity will not
mean absence of educational purpose (see
judgment of this Court in Aditanar Educational
Institutionv. CIT [(1997) 3 SCC 346 : (1997) 224 ITR
310] ). The test is—the nature of activity. If the
activity like running a printing press takes place it is
not educational. But whether the income/profit has
been applied for non-educational purpose has to be
decided only at the end of the financial year.
32. We shall now consider the effect of insertion of
provisos to Section 10(23-C)(vi) vide the Finance
(No. 2) Act, 1998. Section 10(23-C)(vi) is analogous
to Section 10(22). To that extent, the judgments of
this Court as applicable to Section 10(22) would
equally apply to Section 10(23-C)(vi). The problem
arises with the insertion of the provisos to Section
10(23-C)(vi). With the insertion of the provisos to
Section 10(23-C)(vi) the applicant who seeks
approval has not only to show that it is an institution
existing solely for educational purposes [which was
also the requirement under Section 10(22)] but it
has now to obtain initial approval from the PA, in
terms of Section 10(23-C)(vi) by making an
14Page 15
application in the standardised form as mentioned in
the first proviso to that section. That condition of
obtaining approval from the PA came to be inserted
because Section 10(22) was abused by some
educational institutions/universities. This proviso
was inserted along with other provisos because
there was no monitoring mechanism to check abuse
of exemption provision. With the insertion of the first
proviso, the PA is required to vet the application.
This vetting process is stipulated by the second
proviso. Under the twelfth proviso, the PA is
required to examine cases where an applicant does
not apply its income during the year of receipt and
accumulates it but makes payment therefrom to any
trust or institution registered under Section 12-AA or
to any fund or trust or institution or university or
other educational institution and to that extent the
proviso states that such payment shall not be
treated as application of income to the objects for
which such trust or fund or educational institution is
established. The idea underlying the twelfth proviso
is to provide guidance to the PA as to the meaning
of the words “application of income to the objects for
which the institution is established”. Therefore, the
twelfth proviso is the matter of detail. The most
relevant proviso for deciding this appeal is the
thirteenth proviso. Under that proviso, the
circumstances are given under which the PA is
empowered to withdraw the approval earlier
granted. Under that proviso, if the PA is satisfied
that the trust, fund, university or other educational
institution, etc. has not applied its income in
accordance with the third proviso or if it finds that
such institution, trust or fund, etc. has not
invested/deposited its funds in accordance with the
third proviso or that the activities of such fund or
institution or trust, etc. are not genuine or that its
activities are not being carried out in accordance
with the conditions subject to which approval is
granted then the PA is empowered to withdraw the
15Page 16
approval earlier granted after complying with the
procedure mentioned therein.
33. Having analysed the provisos to Section 10(23-
C)(vi) one finds that there is a difference between
stipulation of conditions and compliance therewith.
The threshold conditions are actual existence of an
educational institution and approval of the
prescribed authority for which every applicant has to
move an application in the standardised form in
terms of the first proviso. It is only if the prerequisite
condition of actual existence of the educational
institution is fulfilled that the question of compliance
with requirements in the provisos would arise. We
find merit in the contention advanced on behalf of
the appellant that the third proviso contains
monitoring conditions/requirements like application,
accumulation, deployment of income in specified
assets whose compliance depends on events that
have not taken place on the date of the application
for initial approval.
34. To make the section with the proviso workable
we are of the view that the monitoring conditions in
the third proviso like application/utilisation of
income, pattern of investments to be made, etc.
could be stipulated as conditions by the PA subject
to which approval could be granted.”
11. Thus, the law common to Section 10(23C) (iiiad) and (vi) may
be summed up as follows:
(1) Where an educational institution carries on the
activity of education primarily for educating persons,
the fact that it makes a surplus does not lead to the
16Page 17
conclusion that it ceases to exist solely for
educational purposes and becomes an institution for
the purpose of making profit.
(2) The predominant object test must be applied – the
purpose of education should not be submerged by a
profit making motive.
(3) A distinction must be drawn between the making of a
surplus and an institution being carried on “for profit”.
No inference arises that merely because imparting
education results in making a profit, it becomes an
activity for profit.
(4) If after meeting expenditure, a surplus arises
incidentally from the activity carried on by the
educational institution, it will not be cease to be one
existing solely for educational purposes.
(5) The ultimate test is whether on an overall view of the
matter in the concerned assessment year the object
is to make profit as opposed to educating persons.
17Page 18
12. The Uttarakhand High Court in the impugned judgment
dated 24th September, 2007 quoted the ITAT order in paragraph
7 as follows:
“The ITAT while granting exemption under
Section 10(23C) (iiiad) recorded the following
reasons:
“During the years relevant for asstt. Year 2000-01
and 2001-02, the excess of income over
expenditure stood at Rs.6,58,862/- and
Rs.7,82,632/- respectively. It was also noticed that
the appellant society had made investment in fixed
assets including building at Rs.9,52,010/- in F.Y.
1999-2000 and Rs.8,47,742/- in FY 2000-01
relevant for Asstt. Years 2000-01 and 2001-02
respectively. Thus, if the amount of investment into
fixed assets such as building, furniture and fixture
etc. were also kept in view, there was hardly any
surplus left….. The assessee society is
undoubtedly engaged in imparting education and
has to maintain a teaching and non teaching staff
and has to pay for their salaries and other incidental
expenses. It, therefore, becomes necessary to
charge certain fee from the students for meeting all
these expenses. The charging of fee is incidental to
the prominent objective of the trust i.e. imparting
education. The trust was initially running the school
in a rented building and the surplus, i.e. the excess
of the receipts over expenditure.
In the year under appeal (and in the earlier appeals)
has enabled the appellant to acquire its own
property, acquire computers, library books, sports
equipments etc. for the benefit of the students. And
more importantly the members of the society have
not utilized any part of the surplus for their own
benefit. The AO wrongly interpreted the resultant
18Page 19
surplus as the main objective of the assessee trust.
As held above, profit is only incidental to the main
object of spreading education. If there is no surplus
out of the difference between receipts and
outgoings, the trust will not be able to achieve the
objectives. Any education institution cannot be run
in rented premises for all the times and without
necessary equipment and without paying to the staff
engaged in imparting education. The assessee is
not getting any financial aid/assistance from the
Government or other philanthropic agency and,
therefore, to achieve the objective, it has to raise its
own funds. But such surplus would not come within
the ambit of denying exemption u/s 10(23C) (iiiad)
of the Act.”
13. Having set out the ITAT order, the Uttarakhand High
Court held:
“Thus, in view of the established fact relating to
earned profit, we do not agree with the reasoning
given by the ITAT for granting exemption.”
14. Having said this, the impugned judgment goes on to
quote Aditanar Educational Institution v. CIT. as follows:-
“After meeting the expenditure, if any surplus result
incidentally from the activity lawfully carried on by
the educational institution, it will not cease to be one
existing solely for educational purpose since the
object is not one to make profit. The decisive or
acid test is whether on an overall view of the matter,
the object is to make profit. In evaluating or
appraising the above, one should also bear in mind
19Page 20
the distinction difference between the corpus, the
objects and powers of the concerned entity.
If one looks at the object clause, there are
other noble and pious objects but assessee society
has done nothing to achieve the other objects
except pursuing main object of providing education
and earning profit. Further, with profit earned the
society has strengthened or enhanced its capacity
to earn more rather than to fulfill other noble objects
for the cause of poor and needy people or
advancement of religious purpose.
Therefore, the law laid down by the Apex
Court has rightly been applied and exemption has
also rightly been refused by the Assessing Officer in
the facts and circumstances of the case.”
15. It is clear that the High Court did not apply its mind
independently. What has been copied is one paragraph from
the Supreme Court judgment in Aditanar followed by a
paragraph of faulty reasoning by the Assessing Officer and the
said faulty reasoning of the Assessing Officer has been wrongly
said to be the law laid down by the Apex Court.
16. Further, the Supreme Court Judgment in Municipal
Corpn. of Delhi v. Children Book Trust and Safdarjung
Enclave Educational Society, (1992) 3 SCC 390 has then
been followed. The aforesaid judgment dealt with a property
tax provision, namely, Section 115 (4) of the Delhi Municipal
20Page 21
Corporation Act, 1957. Three questions were raised in the said
judgment as follows:-
“56. In the present case, the questions which arise
for our determination are:
(i) Whether the society or body is occupying and
using the land and building for a charitable
purpose within the meaning of sub-section (4)?
(ii) What is the meaning of the expression
“supported wholly or in part by voluntary
contribution”?
(iii) Whether any trade or business is carried on in
the premises within the meaning of sub-section
(5)?”
17. In answering question one, the Court held that School
Education would only come within an exemption if it involved
public benefit. Having so held, the Court stated:
“78. The rulings arising out of Income Tax Act may
not be of great help because in the Income Tax Act
“charitable purpose” includes the relief of the poor,
education, medical relief and the advancement of
any other object of general public utility. The
advancement of any other object of general public
utility is not found under the Delhi Municipal
Corporation Act. In other words, the definition is
narrower in scope. This is our answer to question
No. 1.”
18. Secondly, the extracted portion from the said judgment in
the judgment of the Uttarakhand High Court concerned itself
21Page 22
with question two, namely, whether the educational society is
supported wholly or in part by voluntary contributions. It is part
of paragraph 80 of the said judgment. If the sentences after the
quoted portion are also set out, it becomes clear that the
passage relied upon by the High Court has absolutely nothing
to do with the present case. The entirety of the passage is now
set out hereinbelow:
“82. …In other words, what we want to stress is,
where a society or body is making systematic profit,
even though that profit is utilised only for charitable
purposes, yet it cannot be said that it could claim
exemption. If, merely qualitative test is applied to
societies, even schools which are run on
commercial basis making profits would go out of the
purview of taxation and could demand exemption.
Thus, the test, according to us, must be whether the
society could survive without receiving voluntary
contributions, even though it may have some
income by the activities of the society. The word
“part” mean an appreciable amount and not an
insignificant one. The “part” in other words, must be
substantial part. What is substantial would depend
upon the facts and circumstances of each case.”
19. It is clear, therefore, that the Uttarakhand High Court has
erred by quoting a non existent passage from an applicable
judgment, namely, Aditanar and quoting a portion of a property
tax judgment which expressly stated that rulings arising out of
22Page 23
the Income Tax Act would not be applicable. Quite apart from
this, it also went on to further quote from a portion of the said
property tax judgment which was rendered in the context of
whether an educational society is supported wholly or in part
by voluntary contributions, something which is completely
foreign to Section 10(23C) (iiiad). The final conclusion that if a
surplus is made by an educational society and ploughed back
to construct its own premises would fall foul of Section 10(23C)
is to ignore the language of the Section and to ignore the tests
laid down in the Surat Art Silk Cloth case, Aditanar case and
the American Hotel and Lodging case. It is clear that when a
surplus is ploughed back for educational purposes, the
educational institution exists solely for educational purposes
and not for purposes of profit. In fact, in S.RM.M.CT.M.
Tiruppani Trust v. Commissioner of Income Tax, (1998) 2
SCC 584, this Court in the context of benefit claimed under
Section 11 of the Act held:
“9. In the present case, the assessee is not
claiming any benefit under Section 11(2) as it
cannot; because in respect of this assessment year,
the assessee has not complied with the conditions
laid down in Section 11(2). The assessee, however,
23Page 24
is entitled to claim the benefit of Section 11(1)(a). In
the present case, the assessee has applied Rs 8
lakhs for charitable purposes in India by purchasing
a building which is to be utilised as a hospital. This
income, therefore, is entitled to an exemption under
Section 11(1). In addition, under Section 11(1)(a),
the assessee can accumulate 25% of its total
income pertaining to the relevant assessment year
and claim exemption in respect thereof. Section
11(1)(a) does not require investment of this limited
accumulation in government securities. The balance
income of Rs 1,64,210.03 constitutes less than 25%
of the income for Assessment Year 1970-71.
Therefore, the assessee is entitled to accumulate
this income and claim exemption from income tax
under Section 11(1)(a).”
We set aside the judgment of the Uttarakhand High Court
dated 24th September, 2007. The reasoning of the ITAT (set
aside by the High Court) is more in consonance with the law
laid down by this Court, and we approve its decision.
20. Revenue’s appeals from the Punjab and Haryana High
Court concern themselves with Sections 10(23C) (vi). A large
number of writ petitions were heard in Civil Writ Petition No.
6031 of 2009 and disposed of on 29th January, 2010. By
various impugned orders passed, the Chief, CIT, Chandigarh
withdrew exemptions granted under Section 10(23C) (vi) of the
Income Tax Act read with Rule 2CA of Income Tax Rules,
24Page 25
1961, for various assessment years. The operative part of the
order passed by the Chief, CIT in these cases is the same and
reads as follows:
“4. I have considered the submissions of the
assessee. The decisions quoted in support of its
contention are not relevant and are distinguishable
on facts as well as issues. It is clear that the ratio of
the decision of Hon'ble Uttarakhand High Court is
squarely applicable in this case.
5. The Hon'ble Supreme Court has held, in the case
of Aditanar Educational Institution etc. v. Addl.
Commissioner of Income Tax [224 ITR 310 (SC)],
that in the case of an educational institution, after
meeting the expenditure, if any surplus results
incidentally, then the institution will not cease to be
one existing solely for educational purposes.
6. The crucial condition is that surplus should result
only incidentally and should not be aimed for. If
substantial profits are earned in one year if (it)?
would be duty of the institution to lower its fees for
the subsequent year so that such profits are not
intentionally generated. If, however, profits continue
year after year than it cannot be said that the
surplus is arising incidentally.
7. In the present ease, the profits are substantial
and are arising year alter year and therefore, the
decision of the Apex Court in the case of Aditanar
Education Institution v. Addl. Commissioner of
Income Tax as well as the decision of the Hon'ble
Uttrakhand High Court is applicable.
8. Exemption u/s 10(23C)(vi) is not available to the
assessee under the law in view of the above facts
and circumstances and therefore, exemption
already granted vide order dated 4th June, 2007 is
hereby withdrawn.
25Page 26
9. The assessee is at liberty to reduce the fees
being charged and price of its services and apply
afresh, in which case the application will be duly
considered on merits.”
21. It is these orders that were set aside by the judgment of
the Punjab and Haryana High Court impugned by the Revenue
before us.
22. Section 10(23C)(vi) read with the 3rd and 13th provisos
thereto and Section 11(5) of the Income Tax Act are as
follows:-
“Section 10- Incomes not included in total
income.—In computing the total income of a
previous year of any person, any income falling
within any of the following clauses shall not be
included—
(23-C) any income received by any person on
behalf of—
(vi) any university or other educational institution
existing solely for educational purposes and not for
purposes of profit, other than those mentioned in
sub-clause (iii-ab) or sub-clause (iii-ad) and which
may be approved by the prescribed authority
Provided also that the fund or trust or institution [or
any university or other educational institution or any
hospital or other medical institution] referred to in
sub-clause (iv) or sub-clause (v)[or sub-clause (vi)
or sub-clause (vi-a)]—[(a) applies its income, or
accumulates it for application, wholly and
exclusively to the objects for which it is established
26Page 27
and in a case where more than fifteen per cent of its
income is accumulated on or after the 1st day of
April, 2002, the period of the accumulation of the
amount exceeding fifteen per cent of its income
shall in no case exceed five years; and;].
[(b) does not invest or deposit its funds, other than
—
(i) any assets held by the fund, trust or institution [or
any university or other educational institution or any
hospital or other medical institution] where such
assets form part of the corpus of the fund, trust or
institution [or any university or other educational
institution or any hospital or other medical
institution] as on the 1st day of June, 1973;
[(i-a) any asset, being equity shares of a public
company, held by any university or other
educational institution or any hospital or other
medical institution where such assets form part of
the corpus of any university or other educational
institution or any hospital or other medical institution
as on the 1st day of June, 1998;]
(ii) any assets (being debentures issued by, or on
behalf of, any company or corporation), acquired by
the fund, trust or institution [or any university or
other educational institution or any hospital or other
medical institution] before the 1st day of March,
1983;
(iii) any accretion to the shares, forming part of the
corpus mentioned in sub-clause (i)[and sub-clause
(i-a)], by way of bonus shares allotted to the fund,
trust or institution[or any university or other
educational institution or any hospital or other
medical institution];
(iv) voluntary contributions received and maintained in
the form of jewellery, furniture or any other article as
the Board may, by notification in the Official
Gazette, specify,
27Page 28
for any period during the previous year otherwise
than in any one or more of the forms or modes
specified in sub-section (5) of Section 11:
Provided also that where the fund or institution
referred to in sub-clause (iv) or trust or institution
referred to in sub-clause (v) is notified by the
Central Government or any university or other
educational institution referred to in subclause
(vi) or any hospital or other medical
institution referred to in sub-clause (vi-a), is
approved by the prescribed authority and
subsequently that Government or the prescribed
authority is satisfied that—
(i) such fund or institution or trust or any university or
other educational institution or any hospital or other
medical institution has not,—
(A) applied its income in accordance with the
provisions contained in clause (a) of the third
proviso; or
(B) invested or deposited its funds in accordance with
the provisions contained in clause(b) of the third
proviso; or
(ii) the activities of such fund or institution or trust or
any university or other educational institution or any
hospital or other medical institution,—
(A) are not genuine; or
(B) are not being carried out in accordance with all or
any of the conditions subject to which it was notified
or approved,
it may, at any time after giving a reasonable
opportunity of showing cause against the proposed
action to the concerned fund or institution or trust or
any university or other educational institution or any
hospital or other medical institution, rescind the
notification or, by order, withdraw the approval, as
the case may be, and forward a copy of the order
28Page 29
rescinding the notification or withdrawing the
approval to such fund or institution or trust or any
university or other educational institution or any
hospital or other medical institution and to the
Assessing Officer;]
Section 11. Income from property held for
charitable or religious purposes.—
(5) The forms and modes of investing or
depositing the money referred to in clause (b) of
sub-section (2) shall be the following, namely:—
(i) investment in savings certificates as defined in
clause (c) of Section 2 of the Government Savings
Certificates Act, 1959 (46 of 1959), and any other
securities or certificates issued by the Central
Government under the Small Savings Schemes of
that Government;
(ii) deposit in any account with the Post Office Savings
Bank;
(iii) deposit in any account with a scheduled bank or a
cooperative society engaged in carrying on the
business of banking (including a cooperative land
mortgage bank or a cooperative land development
bank).
Explanation.—In this clause, “scheduled bank” means
the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary
bank as defined in the State Bank of India
(Subsidiary Banks) Act, 1959 (38 of 1959), a
corresponding new bank constituted under Section
3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 (5 of 1970), or
under Section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act,
1980 (40 of 1980), or any other bank being a bank
included in the Second Schedule to the Reserve
Bank of India Act, 1934 (2 of 1934);
29Page 30
(iv) investment in units of the Unit Trust of India
established under the Unit Trust of India Act, 1963
(52 of 1963);
(v) investment in any security for money created and
issued by the Central Government or a State
Government;
(vi) investment in debentures issued by, or on behalf
of, any company or corporation both the principal
whereof and the interest whereon are fully and
unconditionally guaranteed by the Central
Government or by a State Government;
(vii) investment or deposit in any public sector
company:
[Provided that where an investment or deposit in any
public sector company has been made and such
public sector company ceases to be a public sector
company,—
(A) such investment made in the shares of such
company shall be deemed to be an investment
made under this clause for a period of three years
from the date on which such public sector company
ceases to be a public sector company;
(B) such other investment or deposit shall be deemed
to be an investment or deposit made under this
clause for the period up to the date on which such
investment or deposit becomes repayable by such
company;].
(viii) deposits with or investment in any bonds issued
by a financial corporation which is engaged in
providing long-term finance for industrial
development in India and [which is eligible for
deduction under clause (viii) of sub-section (1) of
Section 36];
(ix) deposits with or investment in any bonds issued by
a public company formed and registered in India
with the main object of carrying on the business of
30Page 31
providing long-term finance for construction or
purchase of houses in India for residential purposes
and[which is eligible for deduction under clause (viii)
of sub-section (1) of Section 36];
[(ix-a) deposits with or investment in any bonds issued
by a public company formed and registered in India
with the main object of carrying on the business of
providing long-term finance for urban infrastructure
in India.
Explanation.—For the purposes of this clause,—
(a) “long-term finance” means any loan or advance
where the terms under which moneys are loaned or
advanced provide for repayment along with interest
thereof during a period of not less than five years;
(b) “public company” shall have the meaning assigned
to it in Section 3 of the Companies Act, 1956;
(c) “urban infrastructure” means a project for providing
potable water supply, sanitation and sewerage,
drainage, solid waste management, roads, bridges
and flyovers or urban transport;].
(x) investment in immovable property.
Explanation.—”Immovable property” does not include
any machinery or plant (other than machinery or
plant installed in a building for the convenient
occupation of the building) even though attached to,
or permanently fastened to, anything attached to the
earth;
(xi) deposits with the Industrial Development Bank of
India established under the Industrial Development
Bank of India Act, 1964 (18 of 1964);
(xii) any other form or mode of investment or deposit
as may be prescribed.”
31Page 32
23. The Punjab and Haryana High Court, by the impugned
judgment dated 29th January, 2010 expressed its dissatisfaction
with the view taken by the Uttarakhand High Court in the case
of Queen’s Educational Society as follows:
“8.8 We have not been able to persuade ourselves
to accept the view expressed by the Division Bench
of the Uttrakhand High Court in the case of Queens
Educational Society (supra). There are variety of
reasons to support our opinion. Firstly, the scope of
the third proviso was not under consideration,
inasmuch as, the case before the Uttrakhand High
Court pertained to Section 10(23C)(iiiad) of the Act.
The third proviso to Section 10(23C)(vi) is not
applicable to the cases falling within the purview of
Section 10(23C)(iiiad). Secondly, the judgment
rendered by the Uttarkhand High Court runs
contrary to the provisions of Section 10(23C)(vi) of
the Act including the provisos thereunder. Section
10(23C)(vi) of the Act is equivalent to the provisions
of Section 10(22) existing earlier, which were
introduced with effect from 1st April, 1999 and it
ignores the speech of the Finance Minister made
before the introduction of the said provisions,
namely. Section 10(23C) of the Act [See
observations in American Hotel and Lodging
Association Educational Institute's case (supra)].
Thirdly, the Uttrakhand High Court has not
appreciated correctly the ratio of the judgment
rendered by Hon'ble the Supreme Court in the case
of Aditanar Educational Institution(supra) and while
applying the said judgment including the judgment
which had been rendered by Hon'ble the Supreme
Court in the case of Children Book Trust (supra), it
lost sight of the amendment which had been carried
out with effect from 1st April, 1999 leading to the
32Page 33
introduction of the provisions of Section 10(23C) of
the Act. Lastly, that view is not consistent with the
law laid down by Hon'ble the Supreme Court in
American Hotel and Lodging Association
Educational Institute (surpa).”
It then summed up its conclusions as follows:
“8.13 From the aforesaid discussion, the following
principles of law can be summed up:—
(1) It is obligatory on the part of the Chief
Commissioner of Income Tax or the Director, which
are the prescribed authorities, to comply with
proviso thirteen (un-numbered). Accordingly, it has
to be ascertained whether the educational institution
has been applying its profit wholly and exclusively to
the object for which the institution is established.
Merely because an institution has earned profit
would not be deciding factor to conclude that the
educational institution exists for profit.
(2) The provisions of Section 10(23C)(vi) of the Act are
analogous to the erstwhile Section 10(22) of the
Act, as has been laid down by Hon'ble the Supreme
Court in the case of American Hotel and Lodging
Association (supra). To decide the entitlement of an
institution for exemption under Section 10(23C)(vi)
of the Act, the test of predominant object of the
activity has to be applied by posing the question
whether it exists solely for education and not to earn
profit [See 5-Judges Constitution Bench judgment in
the case of Surat Art Silk Cloth Manufacturers
Association (supra)]. It has to be borne in mind that
merely because profits have resulted from the
activity of imparting education would not result in
change of character of the institution that it exists
solely for educational purpose. A workable solution
has been provided by Hon'ble the Supreme Court in
para 33 of its judgment in American Hotel and
Lodging Association's case (supra). Thus, on an
application made by an institution, the prescribed
authority can grant approval subject to such terms
and conditions as it may deems fit provided that
they are not in conflict with the provisions of the Act.
The parameters of earning profit beyond 15% and
its investment wholly for educational purposes may
be expressly stipulated as per the statutory
requirement. Thereafter the Assessing Authority
may ensure compliance of those conditions. The
cases where exemption has been granted earlier
and the assessments are complete with the finding
that there is no contravention of the statutory
provisions, need not be reopened. However, alter
grant of approval if it comes to the notice of the
prescribed authority that the conditions on which
approval was given, have been violated or the
circumstances mentioned in 13th proviso exists,
then by following the procedure envisaged in 13th
proviso, the prescribed authority can withdraw the
approval.
(3) The capital expenditure wholly and exclusively to
the objects of education is entitled to exemption and
would not constitute part of the total income.
(4) The educational institutions, which are registered
as a Society, would continue to retain their
character as such and would be eligible to apply for
exemption under Section 10(23C)(vi) of the Act.
[See para 8.7 of the judgment-Aditanar Educational
Institution case (supra)]
(5) Where more than 15% of income of an educational
institution is accumulated on or after 1st April, 2002,
the period of accumulation of the amount exceeding
15% is not permissible beyond five years, provided
the excess income has been applied or
accumulated for application wholly and exclusively
for the purpose of education.
(6) The judgment of Uttrakhand High Court rendered in
the case of Queens Educational Society (supra) and
the connected matters, is not applicable to cases
fall within the provision of Section 10(23C)(vi) of the
Act. There are various reasons, which have been
discussed in para 8.8 of the judgment, and the
judgment of Allahabad High Court rendered in the
case of City Montessori School (supra) lays down
the correct law.”
And finally held:
“8.15 As a sequel to the aforesaid discussion,
these petitions are allowed and the impugned
orders passed by the Chief Commissioner of
Income Tax withdrawing the exemption granted
under Section 10(23C)(iv) of the Act are hereby
quashed. However, the revenue is at liberty to pass
any fresh orders, if such a necessity is felt after
taking into consideration the various propositions of
law culled out by us in para 8.13 and various other
paras.
8.16 The writ petitions stand disposed of in the
above terms.”
24. The view of the Punjab and Haryana High Court has been
followed by the Delhi High Court in St. Lawrence Educational
Society (Regd.) v. Commissioner of Income Tax & Anr.,
(2011) 53 DTR (Del) 130. Also in Tolani Education Society v.
Deputy Director of Income Tax (Exemption) & Ors., (2013)
351 ITR 184, the Bombay High Court has expressed a view in
line with the Punjab and Haryana High Court view, following the
35Page 36
judgments of this Court in the Surat Art Silk Manufacturers
Association Case and Aditanar Educational Institution case
as follows:
“…..The fact that the Petitioner has a surplus of
income over expenditure for the three years in
question, cannot by any stretch of logical reasoning
lead to the conclusion that the Petitioner does not
exist solely for educational purposes or, as that
Chief Commissioner held that the Petitioner exists
for profit. The test to be applied is as to whether the
predominant nature of the activity is educational. In
the present case, the sole and dominant nature of
the activity is education and the Petitioner exists
solely for the purposes of imparting education. An
incidental surplus which is generated, and which
has resulted in additions to the fixed assets is
utilized as the balance-sheet would indicate towards
upgrading the facilities of the college including for
the purchase of library books and the improvement
of infrastructure. With the advancement of
technology, no college or institution can afford to
remain stagnant. The Income-tax Act 1961 does not
condition the grant of an exemption under Section
10(23C) on the requirement that a college must
maintain the status-quo, as it were, in regard to its
knowledge based infrastructure. Nor for that matter
is an educational institution prohibited from
upgrading its infrastructure on educational facilities
save on the pain of losing the benefit of the
exemption under Section 10(23C). Imposing such a
condition which is not contained in the statute would
lead to a perversion of the basic purpose for which
such exemptions have been granted to educational
institutions. Knowledge in contemporary times is
technology driven. Educational institutions have to
modernise, upgrade and respond to the changing
ethos of education.
Education has to be responsive to a rapidly evolving
society. The provisions of Section 10(23C) cannot
be interpreted regressively to deny exemptions. So
long as the institution exists solely for educational
purposes and not for profit, the test is met.”
25. We approve the judgments of the Punjab and Haryana,
Delhi and Bombay High Courts. Since we have set aside the
judgment of the Uttarakhand High Court and since the Chief
CIT’s orders cancelling exemption which were set aside by the
Punjab and Haryana High Court were passed almost solely
upon the law declared by the Uttarakhand High Court, it is clear
that these orders cannot stand. Consequently, Revenue’s
appeals from the Punjab and Haryana High Court’s judgment
dated 29.1.2010 and the judgments following it are dismissed.
We reiterate that the correct tests which have been culled out in
the three Supreme Court judgments stated above, namely,
Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging,
would all apply to determine whether an educational institution
exists solely for educational purposes and not for purposes of
profit. In addition, we hasten to add that the 13th proviso to
37Page 38
Section 10(23C) is of great importance in that assessing
authorities must continuously monitor from assessment year to
assessment year whether such institutions continue to apply
their income and invest or deposit their funds in accordance
with the law laid down. Further, it is of great importance that
the activities of such institutions be looked at carefully. If they
are not genuine, or are not being carried out in accordance with
all or any of the conditions subject to which approval has been
given, such approval and exemption must forthwith be
withdrawn. All these cases are disposed of making it clear that
revenue is at liberty to pass fresh orders if such necessity is felt
after taking into consideration the various provisions of law
contained in Section 10(23C) read with Section 11 of the
Income Tax Act.
26. We now come to Civil Appeal No.8962 of 2010. Vide a
judgment dated 29th January, 2010, the Punjab and Haryana
High Court dismissed CWP No.7268 of 2009 in the following
terms:
“8. It is conceded position that the assesseepetitioner
has filed the application on 23.9.2008
seeking exemption under Section 10(23C)(vi) in
respect of assessment year 2008-09, which could
have been filed during the financial year 2007-08
i.e. on or before 31.3.2008. It is, thus, evident that
the application by the assessee petitioner has been
filed after the prescribed period and the Chief
Commissioner of Income Tax has rightly rejected
the same being not maintainable.
9. As a sequel to the above discussion, we find
no ground to interfere with the impugned order
passed by the Chief Commissioner of Income Tax.
There is no merit in the instant petition warranting
its admission. Accordingly, the writ petition fails and
the same is dismissed.”
27. These being the facts, we see no reason to interfere. This
appeal shall stand dismissed with no order as to costs.
….…..…..………………………...J.
(T.S. Thakur)
….…..…..………………………...J.
(R.F. Nariman)
New Delhi,
March 16, 2015.
Print Page
Educational Institution v. Additional Commissioner of
Income Tax, (1997) 224 ITR 310, this Court while construing
the predecessor Section, namely, Section 10(22) of the Income
Tax act, held:
“The High Court has made an observation that any
income which has a direct relation or incidental to
the running of the institution as such would qualify
for exemption. We may state that the language of
Section 10(22) of the Act is plain and clear and the
availability of the exemption should be evaluated
each year to find out whether the institution existed
during the relevant year solely for educational
purposes and not for the purposes of profit. After
meeting the expenditure, if any surplus results
incidentally from the activity lawfully carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes since the
object is not one to make profit. The decisive or acid
test is whether on an overall view of the matter, the
object is to make profit. In evaluating or appraising
the above, one should also bear in mind the
distinction/difference between the corpus, the
objects and the powers of the concerned entity.”
10. In American Hotel & Lodging Assn. Educational
Institute v. CBDT, (2008) 301 ITR 86, this Court dealt with
Section 10(23C)(vi) as follows:
“29. In CIT v. Surat Art Silk Cloth Manufacturers'
Assn. [(1980) 2 SCC 31 : 1980 SCC (Tax) 170 :
(1980) 121 ITR 1] it has been held by this Court that
test of predominant object of the activity is to be
seen whether it exists solely for education and not
to earn profit. However, the purpose would not lose
its character merely because some profit arises
from the activity. That, it is not possible to carry on
educational activity in such a way that the
expenditure exactly balances the income and there
is no resultant profit, for, to achieve this, would not
only be difficult of practical realisation but would
reflect unsound principles of management. In order
to ascertain whether the institute is carried on with
the object of making profit or not it is the duty of the
prescribed authority to ascertain whether the
balance of income is applied wholly and exclusively
to the objects for which the applicant is established.
30. In deciding the character of the recipient, it is
not necessary to look at the profits of each year, but
to consider the nature of the activities undertaken in
India. If the Indian activity has no correlation with
education, exemption has to be denied (see
judgment of this Court in Oxford University
Press [(2001) 3 SCC 359 : (2001) 247 ITR 658] ).
Therefore, the character of the recipient of income
must have character of educational institution in
India to be ascertained from the nature of the
activities. If after meeting expenditure, surplus
remains incidentally from the activity carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes. In other
words, existence of surplus from the activity will not
mean absence of educational purpose (see
judgment of this Court in Aditanar Educational
Institutionv. CIT [(1997) 3 SCC 346 : (1997) 224 ITR
310] ). The test is—the nature of activity. If the
activity like running a printing press takes place it is
not educational. But whether the income/profit has
been applied for non-educational purpose has to be
decided only at the end of the financial year.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.5167 OF 2008
M/S. QUEEN’S EDUCATIONAL SOCIETY …APPELLANT
VERSUS
COMMISSIONER OF INCOME TAX …RESPONDENT
WITH
C.A. NO.5168 OF 2008
Citation;AIR 2015 SC 3253
R.F.Nariman, J.
1. Leave granted in the special leave petitions.
2. The present appeals relate to a common judgment dated
24th September, 2007 passed by the High Court of Uttarakhand,
Nainital in two income tax appeals, and a judgment of the
Punjab and Haryana High Court dated 29th January, 2010 in
Pine Grove International Charitable Trust v. Union of India –
(2010) 327 ITR 273 . Various other appeals (excepting Civil
Appeal No.8962 of 2010) are filed by the Union of India/ Central
Board of Direct Taxes in cases where the aforesaid judgment in
Pine Grove has been followed.
3. The facts necessary to understand the controversy in the
two income tax appeals before the Uttarakhand High Court,
Nainital, may be gleaned from the facts of one of them, namely,
the Queen’s Educational Society case. The appellant filed its
return for assessment years 2000-2001 and 2001-2002
showing a net surplus of Rs.6,58,862/- and Rs.7,82,632/-
respectively. Since the appellant was established with the sole
2Page 3
object of imparting education, it claimed exemption under
Section 10(23C) (iiiad) of the Income Tax Act, 1961. The
Assessing Officer vide its order dated 20th February, 2003
rejected the exemption claimed by the appellant. The CIT
(Appeals) by its order dated 28th March, 2003 allowed the
appellant’s appeal, and the ITAT, Delhi, by its judgment dated
7
th July, 2006 passed an order dismissing the appeal preferred
by the revenue. In a reference to the High Court under Section
260A of the Income Tax Act, the High Court vide the impugned
judgment set aside the judgment of the ITAT and affirmed the
order of the Assessing Officer.
4. These appeals from the Uttarakhand High Court, Nainital,
concern themselves with the provision of Section 10(23C) (iiiad)
of the Act:
“Section 10- Incomes not included in total
income.—In computing the total income of a
previous year of any person, any income falling
within any of the following clauses shall not be
included—
(23-C) any income received by any person on
behalf of—
(iii-ad) any university or other educational institution
existing solely for educational purposes and not for
3Page 4
purposes of profit if the aggregate annual receipts of
such university or educational institution do not
exceed the amount of annual receipts as may be
prescribed”
5. It will be noticed that the Section has three requirements
– (a) the educational institution must exist solely for educational
purposes (b) it should not be for purposes of profit and (c) the
aggregate annual receipts of such institution should not exceed
the amount or annual receipts as may be prescribed. Such
prescription is to be found in Rule 2CA being an amount of Rs.1
crore.
6. The said Section was inserted by Finance Act No.2 of
1998 with effect from 1st April, 1999. Prior thereto, the Income
Tax Act had a corresponding Section, namely, Section 10(22)
which was as follows:-
“Section 10- Incomes not included in total
income.—In computing the total income of a
previous year of any person, any income falling
within any of the following clauses shall not be
included—
(22) any income of a university or other educational
institution, existing solely for educational purposes
and not for purposes of profit”
4Page 5
7. We have heard learned counsel for the assessees as well
as learned counsel for the revenue. The assessees argue that
the impugned judgment is contrary to the law laid down by at
least three Supreme Court judgments. Further, the wrong test
has been adopted and followed, which is a test laid down by the
Assessing Officer and not by any Supreme Court judgment –
namely, that whenever a profit/surplus is made by an
educational institution, it ceases to exist solely for educational
purposes and becomes a profit making enterprise. In support of
the Punjab and Haryana High Court judgment under appeal,
counsel for the assessees argued that since the sole basis for
not granting them exemption for the assessment years under
question was the following of the Uttarakhand High Court
judgment, if the said judgment is found to be incorrect, they are
bound to succeed. For that reason, the revenue’s appeal
against the Punjab and Haryana High Court judgment should
be dismissed. Counsel for the revenue, on the other hand,
attempted to support the Uttarakhand High Court judgment by
stating that the Section does not contemplate the making of
large profits. If an educational institution in fact makes large
5Page 6
profits then even though it may plough such profits back into
the purchase of assets for education, yet such institution cannot
be said to be existing solely for educational purposes. It would
then become an institution which would really be for profit.
8. In CIT v. Surat Art Silk Cloth Manufacturers' Assn.,
(1980) 121 ITR 1, this Court while construing the definition of
“charitable purpose” in Section 2(15) of the Income Tax Act
held:
“17. The next question that arises is as to what is
the meaning of the expression “activity for profit”.
Every trust or institution must have a purpose for
which it is established and every purpose must for
its accomplishment involve the carrying on of an
activity. The activity must, however, be for profit in
order to attract the exclusionary clause and the
question therefore is when can an activity be said to
be one for profit? The answer to the question
obviously depends on the correct connotation of the
preposition “for”. This preposition has many shades
of meaning but when used with the active participle
of a verb it means “for the purpose of” and connotes
the end with reference to which something is done.
It is not therefore enough that as a matter of fact an
activity results in profit but it must be carried on with
the object of earning profit. Profit-making must be
the end to which the activity must be directed or in
other words, the predominant object of the activity
must be making a profit. Where an activity is not
pervaded by profit motive but is carried on primarily
for serving the charitable purpose, it would not be
correct to describe it as an activity for profit. But
6Page 7
where, on the other hand, an activity is carried on
with the predominant object of earning profit, it
would be an activity for profit, though it may be
carried on in advancement of the charitable purpose
of the trust or institution. Where an activity is carried
on as a matter of advancement of the charitable
purpose or for the purpose of carrying out the
charitable purpose, it would not be incorrect to say
as a matter of plain English grammar that the
charitable purpose involves the carrying on of such
activity, but the predominant object of such activity
must be to subserve the charitable purpose and not
to earn profit. The charitable purpose should not be
submerged by the profit making motive; the latter
should not masquerade under the guise of the
former. The purpose of the trust, as pointed out by
one of us (Pathak,J.) in Dharmadeepti
v. CIT [(1978) 3 SCC 499 : 1978 SCC (Tax) 193]
must be ‘“essentially charitable in nature” and it
must not be a cover for carrying on an activity which
has profit making as its predominant object. This
interpretation of the exclusionary clause in Section 2
clause (15) derives considerable support from the
speech made by the Finance Minister while
introducing that provision. The Finance Minister
explained the reason for introducing this
exclusionary clause in the following words:
“The definition of ‘charitable purpose’ in that clause
is at present so widely worded that it can be taken
advantage of even by commercial concerns which,
while ostensibly serving a public purpose, get fully
paid for the benefits provided by them namely, the
newspaper industry which while running its concern
on commercial lines can claim that by circulating
newspapers it was improving the general
knowledge of the public. In order to prevent the
misuse of this definition in such cases, the Select
Committee felt that the words ‘not involving the
7Page 8
carrying on of any activity for profit’ should be added
to the definition.”
It is obvious that the exclusionary clause was added
with a view to overcoming the decision of the Privy
Council in the Tribune case [AIR 1939 PC 208 : In
Re the Trustees of the Tribune, (1939) 7 ITR 415]
where it was held that the object of supplying the
community with an organ of educated public opinion
by publication of a newspaper was an object of
general public utility and hence charitable in
character, even though the activity of publication of
the newspaper was carried on commercial lines with
the object of earning profit. The publication of the
newspaper was an activity engaged in by the trust
for the purpose of carrying out its charitable purpose
and on the facts it was clearly an activity which had
profit making as its predominant object, but even so
it was held by the Judicial Committee that since the
purpose served was an object of general public
utility, it was a charitable purpose. It is clear from
the speech of the Finance Minister that it was with a
view to setting at naught this decision that the
exclusionary clause was added in the definition of
“charitable purpose”. The test which has, therefore,
now to be applied is whether the predominant object
of the activity involved in carrying out the object of
general public utility is to subserve the charitable
purpose or to earn profit. Where profit making is the
predominant object of the activity, the purpose,
though an object of general public utility, would
cease to be a charitable purpose. But where the
predominant object of the activity is to carry out the
charitable purpose and not to earn profit, it would
not lose its character of a charitable purpose merely
because some profit arises from the activity. The
exclusionary clause does not require that the
activity must be carried on in such a manner that it
does not result in any profit. It would indeed be
difficult for persons in charge of a trust or institution
8Page 9
to so carry on the activity that the expenditure
balances the income and there is no resulting profit.
That would not only be difficult of practical
realisation but would also reflect unsound principle
of management. We, therefore, agree with Beg, J.,
when he said in Sole Trustee, Loka Shikshana
Trust case [(1976) 1 SCC 254 : 1976 SCC (Tax)
14 : (1975) 101 ITR 234] that “if the profits must
necessarily feed a charitable purpose under the
terms of the trust, the mere fact that the activities of
the trust yield profit will not alter the charitable
character of the trust. The test now is, more clearly
than in the past, the genuineness of the purpose
tested by the obligation created to spend the money
exclusively or essentially on charity”. The learned
Judge also added that the restrictive condition “that
the purpose should not involve the carrying on of
any activity for profit would be satisfied if profit
making is not the real object” (emphasis supplied).
We wholly endorse these observations.
The application of this test may be illustrated by
taking a simple example. Suppose the Gandhi
Peace Foundation which has been established for
propagation of Gandhian thought and philosophy,
which would admittedly be an object of general
public utility, undertakes publication of a monthly
journal for the purpose of carrying out this charitable
object and charges a small price which is more than
the cost of the publication and leaves a little profit,
would it deprive the Gandhi Peace Foundation of its
charitable character? The pricing of the monthly
journal would undoubtedly be made in such a
manner that it leaves some profit for the Gandhi
Peace Foundation, as, indeed, would be done by
any prudent and wise management, but that cannot
have the effect of polluting the charitable character
of the purpose, because the predominant object of
the activity of publication of the monthly journal
would be to carry out the charitable purpose by
9Page 10
propagating Gandhian thought and philosophy and
not to make profit or in other words, profit making
would not be the driving force behind this activity.
But it is possible that in a given case the degree or
extent of profit making may be of such a nature as
to reasonably lead to the inference that the real
object of the activity is profit making and not serving
the charitable purpose. If, for example, in the
illustration given by us, it is found that the
publication of the monthly journal is carried on
wholly on commercial lines and the pricing of the
monthly journal is made on the same basis on
which it would be made by a commercial
organisation leaving a large margin of profit, it might
be difficult to resist the inference that the activity of
publication of the journal is carried on for profit and
the purpose is non-charitable. We may take by way
of illustration another example given by Krishna
Iyer, J., in the Indian Chamber of Commerce
case [(1976) 1 SCC 324 : 1976 SCC (Tax) 41 :
(1975) 101 ITR 796] where a blood bank collects
blood on payment and supplies blood for a higher
price on commercial basis. Undoubtedly, in such a
case, the blood bank would be serving an object of
general public utility but since it advances the
charitable object by sale of blood as an activity
carried on with the object of making profit, it would
be difficult to call its purpose charitable. Ordinarily
there should be no difficulty in determining whether
the predominant object of an activity is
advancement of a charitable purpose or profit
making. But cases are bound to arise in practice
which may be on the borderline and in such cases
the solution of the problem whether the purpose is
charitable or not may involve much refinement and
present real difficulty.
There is, however, one comment which is
necessary to be made whilst we are on this point
and that arises out of certain observations made by
this Court in Sole Trustee, Loka Shikshana Trust
case [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 :
(1975) 101 ITR 234] as well as Indian Chamber of
Commerce case [(1976) 1 SCC 324 : 1976 SCC
(Tax) 41 : (1975) 101 ITR 796] . It was said by
Khanna, J. in Sole Trustee, Loka Shikshana Trust
case [(1976) 1 SCC 254 : 1976 SCC (Tax) 14 :
(1975) 101 ITR 234] :
“[I]f the activity of a trust consists of carrying on a
business and there are no restrictions on its making
profit, the court would be well justified in assuming
in the absence of some indication to the contrary
that the object of the trust involves the carrying on
of an activity for profit.”
And to the same effect, observed Krishna Iyer, J. in
the Indian Chamber of Commerce case [(1976) 1
SCC 324 : 1976 SCC (Tax) 41 : (1975) 101 ITR
796] when he said:
“An undertaking by a business organisation is
ordinarily assumed to be for profit unless expressly
or by necessary implication or by eloquent
surrounding circumstances the making of profit
stands loudly negatived .... A pragmatic condition,
written or unwritten, proved by a prescription of
profits or by long years, of invariable practice or
spelt from some strong surrounding circumstances
indicative of anti-profit motivation — such a
condition will qualify for charitable purpose.”
Now we entirely agree with the learned Judges who
decided these two cases that activity involved in
carrying out the charitable purpose must not be
motivated by a profit objective but it must be
undertaken for the purpose of advancement or
carrying out of the charitable purpose. But we find it
difficult to accept their thesis that whenever an
activity is carried on which yields profit, the
inference must necessarily be drawn, in the
11Page 12
absence of some indication to the contrary, that the
activity is for profit and the charitable purpose
involves the carrying on of an activity for profit. We
do not think the Court would be justified in drawing
any such inference merely because the activity
results in profit. It is in our opinion not at all
necessary that there must be a provision in the
constitution of the trust or institution that the activity
shall be carried on no profit no loss basis or that
profit shall be proscribed. Even if there is no such
express provision, the nature of the charitable
purpose, the manner in which the activity for
advancing the charitable purpose is being carried
on and the surrounding circumstances may clearly
indicate that the activity is not propelled by a
dominant profit motive. What is necessary to be
considered is whether having regard to all the facts
and circumstances of the case, the dominant object
of the activity is profit making or carrying out a
charitable purpose. If it is the former, the purpose
would not be a charitable purpose, but, if it is the
latter, the charitable character of the purpose would
not be lost.
9. Coming closer to the section at hand, in Aditanar
Educational Institution v. Additional Commissioner of
Income Tax, (1997) 224 ITR 310, this Court while construing
the predecessor Section, namely, Section 10(22) of the Income
Tax act, held:
“The High Court has made an observation that any
income which has a direct relation or incidental to
the running of the institution as such would qualify
for exemption. We may state that the language of
Section 10(22) of the Act is plain and clear and the
availability of the exemption should be evaluated
each year to find out whether the institution existed
during the relevant year solely for educational
purposes and not for the purposes of profit. After
meeting the expenditure, if any surplus results
incidentally from the activity lawfully carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes since the
object is not one to make profit. The decisive or acid
test is whether on an overall view of the matter, the
object is to make profit. In evaluating or appraising
the above, one should also bear in mind the
distinction/difference between the corpus, the
objects and the powers of the concerned entity.”
10. In American Hotel & Lodging Assn. Educational
Institute v. CBDT, (2008) 301 ITR 86, this Court dealt with
Section 10(23C)(vi) as follows:
“29. In CIT v. Surat Art Silk Cloth Manufacturers'
Assn. [(1980) 2 SCC 31 : 1980 SCC (Tax) 170 :
(1980) 121 ITR 1] it has been held by this Court that
test of predominant object of the activity is to be
seen whether it exists solely for education and not
to earn profit. However, the purpose would not lose
its character merely because some profit arises
from the activity. That, it is not possible to carry on
educational activity in such a way that the
expenditure exactly balances the income and there
is no resultant profit, for, to achieve this, would not
only be difficult of practical realisation but would
reflect unsound principles of management. In order
to ascertain whether the institute is carried on with
the object of making profit or not it is the duty of the
prescribed authority to ascertain whether the
balance of income is applied wholly and exclusively
to the objects for which the applicant is established.
30. In deciding the character of the recipient, it is
not necessary to look at the profits of each year, but
to consider the nature of the activities undertaken in
India. If the Indian activity has no correlation with
education, exemption has to be denied (see
judgment of this Court in Oxford University
Press [(2001) 3 SCC 359 : (2001) 247 ITR 658] ).
Therefore, the character of the recipient of income
must have character of educational institution in
India to be ascertained from the nature of the
activities. If after meeting expenditure, surplus
remains incidentally from the activity carried on by
the educational institution, it will not cease to be one
existing solely for educational purposes. In other
words, existence of surplus from the activity will not
mean absence of educational purpose (see
judgment of this Court in Aditanar Educational
Institutionv. CIT [(1997) 3 SCC 346 : (1997) 224 ITR
310] ). The test is—the nature of activity. If the
activity like running a printing press takes place it is
not educational. But whether the income/profit has
been applied for non-educational purpose has to be
decided only at the end of the financial year.
32. We shall now consider the effect of insertion of
provisos to Section 10(23-C)(vi) vide the Finance
(No. 2) Act, 1998. Section 10(23-C)(vi) is analogous
to Section 10(22). To that extent, the judgments of
this Court as applicable to Section 10(22) would
equally apply to Section 10(23-C)(vi). The problem
arises with the insertion of the provisos to Section
10(23-C)(vi). With the insertion of the provisos to
Section 10(23-C)(vi) the applicant who seeks
approval has not only to show that it is an institution
existing solely for educational purposes [which was
also the requirement under Section 10(22)] but it
has now to obtain initial approval from the PA, in
terms of Section 10(23-C)(vi) by making an
14Page 15
application in the standardised form as mentioned in
the first proviso to that section. That condition of
obtaining approval from the PA came to be inserted
because Section 10(22) was abused by some
educational institutions/universities. This proviso
was inserted along with other provisos because
there was no monitoring mechanism to check abuse
of exemption provision. With the insertion of the first
proviso, the PA is required to vet the application.
This vetting process is stipulated by the second
proviso. Under the twelfth proviso, the PA is
required to examine cases where an applicant does
not apply its income during the year of receipt and
accumulates it but makes payment therefrom to any
trust or institution registered under Section 12-AA or
to any fund or trust or institution or university or
other educational institution and to that extent the
proviso states that such payment shall not be
treated as application of income to the objects for
which such trust or fund or educational institution is
established. The idea underlying the twelfth proviso
is to provide guidance to the PA as to the meaning
of the words “application of income to the objects for
which the institution is established”. Therefore, the
twelfth proviso is the matter of detail. The most
relevant proviso for deciding this appeal is the
thirteenth proviso. Under that proviso, the
circumstances are given under which the PA is
empowered to withdraw the approval earlier
granted. Under that proviso, if the PA is satisfied
that the trust, fund, university or other educational
institution, etc. has not applied its income in
accordance with the third proviso or if it finds that
such institution, trust or fund, etc. has not
invested/deposited its funds in accordance with the
third proviso or that the activities of such fund or
institution or trust, etc. are not genuine or that its
activities are not being carried out in accordance
with the conditions subject to which approval is
granted then the PA is empowered to withdraw the
15Page 16
approval earlier granted after complying with the
procedure mentioned therein.
33. Having analysed the provisos to Section 10(23-
C)(vi) one finds that there is a difference between
stipulation of conditions and compliance therewith.
The threshold conditions are actual existence of an
educational institution and approval of the
prescribed authority for which every applicant has to
move an application in the standardised form in
terms of the first proviso. It is only if the prerequisite
condition of actual existence of the educational
institution is fulfilled that the question of compliance
with requirements in the provisos would arise. We
find merit in the contention advanced on behalf of
the appellant that the third proviso contains
monitoring conditions/requirements like application,
accumulation, deployment of income in specified
assets whose compliance depends on events that
have not taken place on the date of the application
for initial approval.
34. To make the section with the proviso workable
we are of the view that the monitoring conditions in
the third proviso like application/utilisation of
income, pattern of investments to be made, etc.
could be stipulated as conditions by the PA subject
to which approval could be granted.”
11. Thus, the law common to Section 10(23C) (iiiad) and (vi) may
be summed up as follows:
(1) Where an educational institution carries on the
activity of education primarily for educating persons,
the fact that it makes a surplus does not lead to the
16Page 17
conclusion that it ceases to exist solely for
educational purposes and becomes an institution for
the purpose of making profit.
(2) The predominant object test must be applied – the
purpose of education should not be submerged by a
profit making motive.
(3) A distinction must be drawn between the making of a
surplus and an institution being carried on “for profit”.
No inference arises that merely because imparting
education results in making a profit, it becomes an
activity for profit.
(4) If after meeting expenditure, a surplus arises
incidentally from the activity carried on by the
educational institution, it will not be cease to be one
existing solely for educational purposes.
(5) The ultimate test is whether on an overall view of the
matter in the concerned assessment year the object
is to make profit as opposed to educating persons.
17Page 18
12. The Uttarakhand High Court in the impugned judgment
dated 24th September, 2007 quoted the ITAT order in paragraph
7 as follows:
“The ITAT while granting exemption under
Section 10(23C) (iiiad) recorded the following
reasons:
“During the years relevant for asstt. Year 2000-01
and 2001-02, the excess of income over
expenditure stood at Rs.6,58,862/- and
Rs.7,82,632/- respectively. It was also noticed that
the appellant society had made investment in fixed
assets including building at Rs.9,52,010/- in F.Y.
1999-2000 and Rs.8,47,742/- in FY 2000-01
relevant for Asstt. Years 2000-01 and 2001-02
respectively. Thus, if the amount of investment into
fixed assets such as building, furniture and fixture
etc. were also kept in view, there was hardly any
surplus left….. The assessee society is
undoubtedly engaged in imparting education and
has to maintain a teaching and non teaching staff
and has to pay for their salaries and other incidental
expenses. It, therefore, becomes necessary to
charge certain fee from the students for meeting all
these expenses. The charging of fee is incidental to
the prominent objective of the trust i.e. imparting
education. The trust was initially running the school
in a rented building and the surplus, i.e. the excess
of the receipts over expenditure.
In the year under appeal (and in the earlier appeals)
has enabled the appellant to acquire its own
property, acquire computers, library books, sports
equipments etc. for the benefit of the students. And
more importantly the members of the society have
not utilized any part of the surplus for their own
benefit. The AO wrongly interpreted the resultant
18Page 19
surplus as the main objective of the assessee trust.
As held above, profit is only incidental to the main
object of spreading education. If there is no surplus
out of the difference between receipts and
outgoings, the trust will not be able to achieve the
objectives. Any education institution cannot be run
in rented premises for all the times and without
necessary equipment and without paying to the staff
engaged in imparting education. The assessee is
not getting any financial aid/assistance from the
Government or other philanthropic agency and,
therefore, to achieve the objective, it has to raise its
own funds. But such surplus would not come within
the ambit of denying exemption u/s 10(23C) (iiiad)
of the Act.”
13. Having set out the ITAT order, the Uttarakhand High
Court held:
“Thus, in view of the established fact relating to
earned profit, we do not agree with the reasoning
given by the ITAT for granting exemption.”
14. Having said this, the impugned judgment goes on to
quote Aditanar Educational Institution v. CIT. as follows:-
“After meeting the expenditure, if any surplus result
incidentally from the activity lawfully carried on by
the educational institution, it will not cease to be one
existing solely for educational purpose since the
object is not one to make profit. The decisive or
acid test is whether on an overall view of the matter,
the object is to make profit. In evaluating or
appraising the above, one should also bear in mind
19Page 20
the distinction difference between the corpus, the
objects and powers of the concerned entity.
If one looks at the object clause, there are
other noble and pious objects but assessee society
has done nothing to achieve the other objects
except pursuing main object of providing education
and earning profit. Further, with profit earned the
society has strengthened or enhanced its capacity
to earn more rather than to fulfill other noble objects
for the cause of poor and needy people or
advancement of religious purpose.
Therefore, the law laid down by the Apex
Court has rightly been applied and exemption has
also rightly been refused by the Assessing Officer in
the facts and circumstances of the case.”
15. It is clear that the High Court did not apply its mind
independently. What has been copied is one paragraph from
the Supreme Court judgment in Aditanar followed by a
paragraph of faulty reasoning by the Assessing Officer and the
said faulty reasoning of the Assessing Officer has been wrongly
said to be the law laid down by the Apex Court.
16. Further, the Supreme Court Judgment in Municipal
Corpn. of Delhi v. Children Book Trust and Safdarjung
Enclave Educational Society, (1992) 3 SCC 390 has then
been followed. The aforesaid judgment dealt with a property
tax provision, namely, Section 115 (4) of the Delhi Municipal
20Page 21
Corporation Act, 1957. Three questions were raised in the said
judgment as follows:-
“56. In the present case, the questions which arise
for our determination are:
(i) Whether the society or body is occupying and
using the land and building for a charitable
purpose within the meaning of sub-section (4)?
(ii) What is the meaning of the expression
“supported wholly or in part by voluntary
contribution”?
(iii) Whether any trade or business is carried on in
the premises within the meaning of sub-section
(5)?”
17. In answering question one, the Court held that School
Education would only come within an exemption if it involved
public benefit. Having so held, the Court stated:
“78. The rulings arising out of Income Tax Act may
not be of great help because in the Income Tax Act
“charitable purpose” includes the relief of the poor,
education, medical relief and the advancement of
any other object of general public utility. The
advancement of any other object of general public
utility is not found under the Delhi Municipal
Corporation Act. In other words, the definition is
narrower in scope. This is our answer to question
No. 1.”
18. Secondly, the extracted portion from the said judgment in
the judgment of the Uttarakhand High Court concerned itself
21Page 22
with question two, namely, whether the educational society is
supported wholly or in part by voluntary contributions. It is part
of paragraph 80 of the said judgment. If the sentences after the
quoted portion are also set out, it becomes clear that the
passage relied upon by the High Court has absolutely nothing
to do with the present case. The entirety of the passage is now
set out hereinbelow:
“82. …In other words, what we want to stress is,
where a society or body is making systematic profit,
even though that profit is utilised only for charitable
purposes, yet it cannot be said that it could claim
exemption. If, merely qualitative test is applied to
societies, even schools which are run on
commercial basis making profits would go out of the
purview of taxation and could demand exemption.
Thus, the test, according to us, must be whether the
society could survive without receiving voluntary
contributions, even though it may have some
income by the activities of the society. The word
“part” mean an appreciable amount and not an
insignificant one. The “part” in other words, must be
substantial part. What is substantial would depend
upon the facts and circumstances of each case.”
19. It is clear, therefore, that the Uttarakhand High Court has
erred by quoting a non existent passage from an applicable
judgment, namely, Aditanar and quoting a portion of a property
tax judgment which expressly stated that rulings arising out of
22Page 23
the Income Tax Act would not be applicable. Quite apart from
this, it also went on to further quote from a portion of the said
property tax judgment which was rendered in the context of
whether an educational society is supported wholly or in part
by voluntary contributions, something which is completely
foreign to Section 10(23C) (iiiad). The final conclusion that if a
surplus is made by an educational society and ploughed back
to construct its own premises would fall foul of Section 10(23C)
is to ignore the language of the Section and to ignore the tests
laid down in the Surat Art Silk Cloth case, Aditanar case and
the American Hotel and Lodging case. It is clear that when a
surplus is ploughed back for educational purposes, the
educational institution exists solely for educational purposes
and not for purposes of profit. In fact, in S.RM.M.CT.M.
Tiruppani Trust v. Commissioner of Income Tax, (1998) 2
SCC 584, this Court in the context of benefit claimed under
Section 11 of the Act held:
“9. In the present case, the assessee is not
claiming any benefit under Section 11(2) as it
cannot; because in respect of this assessment year,
the assessee has not complied with the conditions
laid down in Section 11(2). The assessee, however,
23Page 24
is entitled to claim the benefit of Section 11(1)(a). In
the present case, the assessee has applied Rs 8
lakhs for charitable purposes in India by purchasing
a building which is to be utilised as a hospital. This
income, therefore, is entitled to an exemption under
Section 11(1). In addition, under Section 11(1)(a),
the assessee can accumulate 25% of its total
income pertaining to the relevant assessment year
and claim exemption in respect thereof. Section
11(1)(a) does not require investment of this limited
accumulation in government securities. The balance
income of Rs 1,64,210.03 constitutes less than 25%
of the income for Assessment Year 1970-71.
Therefore, the assessee is entitled to accumulate
this income and claim exemption from income tax
under Section 11(1)(a).”
We set aside the judgment of the Uttarakhand High Court
dated 24th September, 2007. The reasoning of the ITAT (set
aside by the High Court) is more in consonance with the law
laid down by this Court, and we approve its decision.
20. Revenue’s appeals from the Punjab and Haryana High
Court concern themselves with Sections 10(23C) (vi). A large
number of writ petitions were heard in Civil Writ Petition No.
6031 of 2009 and disposed of on 29th January, 2010. By
various impugned orders passed, the Chief, CIT, Chandigarh
withdrew exemptions granted under Section 10(23C) (vi) of the
Income Tax Act read with Rule 2CA of Income Tax Rules,
24Page 25
1961, for various assessment years. The operative part of the
order passed by the Chief, CIT in these cases is the same and
reads as follows:
“4. I have considered the submissions of the
assessee. The decisions quoted in support of its
contention are not relevant and are distinguishable
on facts as well as issues. It is clear that the ratio of
the decision of Hon'ble Uttarakhand High Court is
squarely applicable in this case.
5. The Hon'ble Supreme Court has held, in the case
of Aditanar Educational Institution etc. v. Addl.
Commissioner of Income Tax [224 ITR 310 (SC)],
that in the case of an educational institution, after
meeting the expenditure, if any surplus results
incidentally, then the institution will not cease to be
one existing solely for educational purposes.
6. The crucial condition is that surplus should result
only incidentally and should not be aimed for. If
substantial profits are earned in one year if (it)?
would be duty of the institution to lower its fees for
the subsequent year so that such profits are not
intentionally generated. If, however, profits continue
year after year than it cannot be said that the
surplus is arising incidentally.
7. In the present ease, the profits are substantial
and are arising year alter year and therefore, the
decision of the Apex Court in the case of Aditanar
Education Institution v. Addl. Commissioner of
Income Tax as well as the decision of the Hon'ble
Uttrakhand High Court is applicable.
8. Exemption u/s 10(23C)(vi) is not available to the
assessee under the law in view of the above facts
and circumstances and therefore, exemption
already granted vide order dated 4th June, 2007 is
hereby withdrawn.
25Page 26
9. The assessee is at liberty to reduce the fees
being charged and price of its services and apply
afresh, in which case the application will be duly
considered on merits.”
21. It is these orders that were set aside by the judgment of
the Punjab and Haryana High Court impugned by the Revenue
before us.
22. Section 10(23C)(vi) read with the 3rd and 13th provisos
thereto and Section 11(5) of the Income Tax Act are as
follows:-
“Section 10- Incomes not included in total
income.—In computing the total income of a
previous year of any person, any income falling
within any of the following clauses shall not be
included—
(23-C) any income received by any person on
behalf of—
(vi) any university or other educational institution
existing solely for educational purposes and not for
purposes of profit, other than those mentioned in
sub-clause (iii-ab) or sub-clause (iii-ad) and which
may be approved by the prescribed authority
Provided also that the fund or trust or institution [or
any university or other educational institution or any
hospital or other medical institution] referred to in
sub-clause (iv) or sub-clause (v)[or sub-clause (vi)
or sub-clause (vi-a)]—[(a) applies its income, or
accumulates it for application, wholly and
exclusively to the objects for which it is established
26Page 27
and in a case where more than fifteen per cent of its
income is accumulated on or after the 1st day of
April, 2002, the period of the accumulation of the
amount exceeding fifteen per cent of its income
shall in no case exceed five years; and;].
[(b) does not invest or deposit its funds, other than
—
(i) any assets held by the fund, trust or institution [or
any university or other educational institution or any
hospital or other medical institution] where such
assets form part of the corpus of the fund, trust or
institution [or any university or other educational
institution or any hospital or other medical
institution] as on the 1st day of June, 1973;
[(i-a) any asset, being equity shares of a public
company, held by any university or other
educational institution or any hospital or other
medical institution where such assets form part of
the corpus of any university or other educational
institution or any hospital or other medical institution
as on the 1st day of June, 1998;]
(ii) any assets (being debentures issued by, or on
behalf of, any company or corporation), acquired by
the fund, trust or institution [or any university or
other educational institution or any hospital or other
medical institution] before the 1st day of March,
1983;
(iii) any accretion to the shares, forming part of the
corpus mentioned in sub-clause (i)[and sub-clause
(i-a)], by way of bonus shares allotted to the fund,
trust or institution[or any university or other
educational institution or any hospital or other
medical institution];
(iv) voluntary contributions received and maintained in
the form of jewellery, furniture or any other article as
the Board may, by notification in the Official
Gazette, specify,
27Page 28
for any period during the previous year otherwise
than in any one or more of the forms or modes
specified in sub-section (5) of Section 11:
Provided also that where the fund or institution
referred to in sub-clause (iv) or trust or institution
referred to in sub-clause (v) is notified by the
Central Government or any university or other
educational institution referred to in subclause
(vi) or any hospital or other medical
institution referred to in sub-clause (vi-a), is
approved by the prescribed authority and
subsequently that Government or the prescribed
authority is satisfied that—
(i) such fund or institution or trust or any university or
other educational institution or any hospital or other
medical institution has not,—
(A) applied its income in accordance with the
provisions contained in clause (a) of the third
proviso; or
(B) invested or deposited its funds in accordance with
the provisions contained in clause(b) of the third
proviso; or
(ii) the activities of such fund or institution or trust or
any university or other educational institution or any
hospital or other medical institution,—
(A) are not genuine; or
(B) are not being carried out in accordance with all or
any of the conditions subject to which it was notified
or approved,
it may, at any time after giving a reasonable
opportunity of showing cause against the proposed
action to the concerned fund or institution or trust or
any university or other educational institution or any
hospital or other medical institution, rescind the
notification or, by order, withdraw the approval, as
the case may be, and forward a copy of the order
28Page 29
rescinding the notification or withdrawing the
approval to such fund or institution or trust or any
university or other educational institution or any
hospital or other medical institution and to the
Assessing Officer;]
Section 11. Income from property held for
charitable or religious purposes.—
(5) The forms and modes of investing or
depositing the money referred to in clause (b) of
sub-section (2) shall be the following, namely:—
(i) investment in savings certificates as defined in
clause (c) of Section 2 of the Government Savings
Certificates Act, 1959 (46 of 1959), and any other
securities or certificates issued by the Central
Government under the Small Savings Schemes of
that Government;
(ii) deposit in any account with the Post Office Savings
Bank;
(iii) deposit in any account with a scheduled bank or a
cooperative society engaged in carrying on the
business of banking (including a cooperative land
mortgage bank or a cooperative land development
bank).
Explanation.—In this clause, “scheduled bank” means
the State Bank of India constituted under the State
Bank of India Act, 1955 (23 of 1955), a subsidiary
bank as defined in the State Bank of India
(Subsidiary Banks) Act, 1959 (38 of 1959), a
corresponding new bank constituted under Section
3 of the Banking Companies (Acquisition and
Transfer of Undertakings) Act, 1970 (5 of 1970), or
under Section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act,
1980 (40 of 1980), or any other bank being a bank
included in the Second Schedule to the Reserve
Bank of India Act, 1934 (2 of 1934);
29Page 30
(iv) investment in units of the Unit Trust of India
established under the Unit Trust of India Act, 1963
(52 of 1963);
(v) investment in any security for money created and
issued by the Central Government or a State
Government;
(vi) investment in debentures issued by, or on behalf
of, any company or corporation both the principal
whereof and the interest whereon are fully and
unconditionally guaranteed by the Central
Government or by a State Government;
(vii) investment or deposit in any public sector
company:
[Provided that where an investment or deposit in any
public sector company has been made and such
public sector company ceases to be a public sector
company,—
(A) such investment made in the shares of such
company shall be deemed to be an investment
made under this clause for a period of three years
from the date on which such public sector company
ceases to be a public sector company;
(B) such other investment or deposit shall be deemed
to be an investment or deposit made under this
clause for the period up to the date on which such
investment or deposit becomes repayable by such
company;].
(viii) deposits with or investment in any bonds issued
by a financial corporation which is engaged in
providing long-term finance for industrial
development in India and [which is eligible for
deduction under clause (viii) of sub-section (1) of
Section 36];
(ix) deposits with or investment in any bonds issued by
a public company formed and registered in India
with the main object of carrying on the business of
30Page 31
providing long-term finance for construction or
purchase of houses in India for residential purposes
and[which is eligible for deduction under clause (viii)
of sub-section (1) of Section 36];
[(ix-a) deposits with or investment in any bonds issued
by a public company formed and registered in India
with the main object of carrying on the business of
providing long-term finance for urban infrastructure
in India.
Explanation.—For the purposes of this clause,—
(a) “long-term finance” means any loan or advance
where the terms under which moneys are loaned or
advanced provide for repayment along with interest
thereof during a period of not less than five years;
(b) “public company” shall have the meaning assigned
to it in Section 3 of the Companies Act, 1956;
(c) “urban infrastructure” means a project for providing
potable water supply, sanitation and sewerage,
drainage, solid waste management, roads, bridges
and flyovers or urban transport;].
(x) investment in immovable property.
Explanation.—”Immovable property” does not include
any machinery or plant (other than machinery or
plant installed in a building for the convenient
occupation of the building) even though attached to,
or permanently fastened to, anything attached to the
earth;
(xi) deposits with the Industrial Development Bank of
India established under the Industrial Development
Bank of India Act, 1964 (18 of 1964);
(xii) any other form or mode of investment or deposit
as may be prescribed.”
31Page 32
23. The Punjab and Haryana High Court, by the impugned
judgment dated 29th January, 2010 expressed its dissatisfaction
with the view taken by the Uttarakhand High Court in the case
of Queen’s Educational Society as follows:
“8.8 We have not been able to persuade ourselves
to accept the view expressed by the Division Bench
of the Uttrakhand High Court in the case of Queens
Educational Society (supra). There are variety of
reasons to support our opinion. Firstly, the scope of
the third proviso was not under consideration,
inasmuch as, the case before the Uttrakhand High
Court pertained to Section 10(23C)(iiiad) of the Act.
The third proviso to Section 10(23C)(vi) is not
applicable to the cases falling within the purview of
Section 10(23C)(iiiad). Secondly, the judgment
rendered by the Uttarkhand High Court runs
contrary to the provisions of Section 10(23C)(vi) of
the Act including the provisos thereunder. Section
10(23C)(vi) of the Act is equivalent to the provisions
of Section 10(22) existing earlier, which were
introduced with effect from 1st April, 1999 and it
ignores the speech of the Finance Minister made
before the introduction of the said provisions,
namely. Section 10(23C) of the Act [See
observations in American Hotel and Lodging
Association Educational Institute's case (supra)].
Thirdly, the Uttrakhand High Court has not
appreciated correctly the ratio of the judgment
rendered by Hon'ble the Supreme Court in the case
of Aditanar Educational Institution(supra) and while
applying the said judgment including the judgment
which had been rendered by Hon'ble the Supreme
Court in the case of Children Book Trust (supra), it
lost sight of the amendment which had been carried
out with effect from 1st April, 1999 leading to the
32Page 33
introduction of the provisions of Section 10(23C) of
the Act. Lastly, that view is not consistent with the
law laid down by Hon'ble the Supreme Court in
American Hotel and Lodging Association
Educational Institute (surpa).”
It then summed up its conclusions as follows:
“8.13 From the aforesaid discussion, the following
principles of law can be summed up:—
(1) It is obligatory on the part of the Chief
Commissioner of Income Tax or the Director, which
are the prescribed authorities, to comply with
proviso thirteen (un-numbered). Accordingly, it has
to be ascertained whether the educational institution
has been applying its profit wholly and exclusively to
the object for which the institution is established.
Merely because an institution has earned profit
would not be deciding factor to conclude that the
educational institution exists for profit.
(2) The provisions of Section 10(23C)(vi) of the Act are
analogous to the erstwhile Section 10(22) of the
Act, as has been laid down by Hon'ble the Supreme
Court in the case of American Hotel and Lodging
Association (supra). To decide the entitlement of an
institution for exemption under Section 10(23C)(vi)
of the Act, the test of predominant object of the
activity has to be applied by posing the question
whether it exists solely for education and not to earn
profit [See 5-Judges Constitution Bench judgment in
the case of Surat Art Silk Cloth Manufacturers
Association (supra)]. It has to be borne in mind that
merely because profits have resulted from the
activity of imparting education would not result in
change of character of the institution that it exists
solely for educational purpose. A workable solution
has been provided by Hon'ble the Supreme Court in
para 33 of its judgment in American Hotel and
Lodging Association's case (supra). Thus, on an
application made by an institution, the prescribed
authority can grant approval subject to such terms
and conditions as it may deems fit provided that
they are not in conflict with the provisions of the Act.
The parameters of earning profit beyond 15% and
its investment wholly for educational purposes may
be expressly stipulated as per the statutory
requirement. Thereafter the Assessing Authority
may ensure compliance of those conditions. The
cases where exemption has been granted earlier
and the assessments are complete with the finding
that there is no contravention of the statutory
provisions, need not be reopened. However, alter
grant of approval if it comes to the notice of the
prescribed authority that the conditions on which
approval was given, have been violated or the
circumstances mentioned in 13th proviso exists,
then by following the procedure envisaged in 13th
proviso, the prescribed authority can withdraw the
approval.
(3) The capital expenditure wholly and exclusively to
the objects of education is entitled to exemption and
would not constitute part of the total income.
(4) The educational institutions, which are registered
as a Society, would continue to retain their
character as such and would be eligible to apply for
exemption under Section 10(23C)(vi) of the Act.
[See para 8.7 of the judgment-Aditanar Educational
Institution case (supra)]
(5) Where more than 15% of income of an educational
institution is accumulated on or after 1st April, 2002,
the period of accumulation of the amount exceeding
15% is not permissible beyond five years, provided
the excess income has been applied or
accumulated for application wholly and exclusively
for the purpose of education.
(6) The judgment of Uttrakhand High Court rendered in
the case of Queens Educational Society (supra) and
the connected matters, is not applicable to cases
fall within the provision of Section 10(23C)(vi) of the
Act. There are various reasons, which have been
discussed in para 8.8 of the judgment, and the
judgment of Allahabad High Court rendered in the
case of City Montessori School (supra) lays down
the correct law.”
And finally held:
“8.15 As a sequel to the aforesaid discussion,
these petitions are allowed and the impugned
orders passed by the Chief Commissioner of
Income Tax withdrawing the exemption granted
under Section 10(23C)(iv) of the Act are hereby
quashed. However, the revenue is at liberty to pass
any fresh orders, if such a necessity is felt after
taking into consideration the various propositions of
law culled out by us in para 8.13 and various other
paras.
8.16 The writ petitions stand disposed of in the
above terms.”
24. The view of the Punjab and Haryana High Court has been
followed by the Delhi High Court in St. Lawrence Educational
Society (Regd.) v. Commissioner of Income Tax & Anr.,
(2011) 53 DTR (Del) 130. Also in Tolani Education Society v.
Deputy Director of Income Tax (Exemption) & Ors., (2013)
351 ITR 184, the Bombay High Court has expressed a view in
line with the Punjab and Haryana High Court view, following the
35Page 36
judgments of this Court in the Surat Art Silk Manufacturers
Association Case and Aditanar Educational Institution case
as follows:
“…..The fact that the Petitioner has a surplus of
income over expenditure for the three years in
question, cannot by any stretch of logical reasoning
lead to the conclusion that the Petitioner does not
exist solely for educational purposes or, as that
Chief Commissioner held that the Petitioner exists
for profit. The test to be applied is as to whether the
predominant nature of the activity is educational. In
the present case, the sole and dominant nature of
the activity is education and the Petitioner exists
solely for the purposes of imparting education. An
incidental surplus which is generated, and which
has resulted in additions to the fixed assets is
utilized as the balance-sheet would indicate towards
upgrading the facilities of the college including for
the purchase of library books and the improvement
of infrastructure. With the advancement of
technology, no college or institution can afford to
remain stagnant. The Income-tax Act 1961 does not
condition the grant of an exemption under Section
10(23C) on the requirement that a college must
maintain the status-quo, as it were, in regard to its
knowledge based infrastructure. Nor for that matter
is an educational institution prohibited from
upgrading its infrastructure on educational facilities
save on the pain of losing the benefit of the
exemption under Section 10(23C). Imposing such a
condition which is not contained in the statute would
lead to a perversion of the basic purpose for which
such exemptions have been granted to educational
institutions. Knowledge in contemporary times is
technology driven. Educational institutions have to
modernise, upgrade and respond to the changing
ethos of education.
Education has to be responsive to a rapidly evolving
society. The provisions of Section 10(23C) cannot
be interpreted regressively to deny exemptions. So
long as the institution exists solely for educational
purposes and not for profit, the test is met.”
25. We approve the judgments of the Punjab and Haryana,
Delhi and Bombay High Courts. Since we have set aside the
judgment of the Uttarakhand High Court and since the Chief
CIT’s orders cancelling exemption which were set aside by the
Punjab and Haryana High Court were passed almost solely
upon the law declared by the Uttarakhand High Court, it is clear
that these orders cannot stand. Consequently, Revenue’s
appeals from the Punjab and Haryana High Court’s judgment
dated 29.1.2010 and the judgments following it are dismissed.
We reiterate that the correct tests which have been culled out in
the three Supreme Court judgments stated above, namely,
Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging,
would all apply to determine whether an educational institution
exists solely for educational purposes and not for purposes of
profit. In addition, we hasten to add that the 13th proviso to
37Page 38
Section 10(23C) is of great importance in that assessing
authorities must continuously monitor from assessment year to
assessment year whether such institutions continue to apply
their income and invest or deposit their funds in accordance
with the law laid down. Further, it is of great importance that
the activities of such institutions be looked at carefully. If they
are not genuine, or are not being carried out in accordance with
all or any of the conditions subject to which approval has been
given, such approval and exemption must forthwith be
withdrawn. All these cases are disposed of making it clear that
revenue is at liberty to pass fresh orders if such necessity is felt
after taking into consideration the various provisions of law
contained in Section 10(23C) read with Section 11 of the
Income Tax Act.
26. We now come to Civil Appeal No.8962 of 2010. Vide a
judgment dated 29th January, 2010, the Punjab and Haryana
High Court dismissed CWP No.7268 of 2009 in the following
terms:
“8. It is conceded position that the assesseepetitioner
has filed the application on 23.9.2008
seeking exemption under Section 10(23C)(vi) in
respect of assessment year 2008-09, which could
have been filed during the financial year 2007-08
i.e. on or before 31.3.2008. It is, thus, evident that
the application by the assessee petitioner has been
filed after the prescribed period and the Chief
Commissioner of Income Tax has rightly rejected
the same being not maintainable.
9. As a sequel to the above discussion, we find
no ground to interfere with the impugned order
passed by the Chief Commissioner of Income Tax.
There is no merit in the instant petition warranting
its admission. Accordingly, the writ petition fails and
the same is dismissed.”
27. These being the facts, we see no reason to interfere. This
appeal shall stand dismissed with no order as to costs.
….…..…..………………………...J.
(T.S. Thakur)
….…..…..………………………...J.
(R.F. Nariman)
New Delhi,
March 16, 2015.
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